FinanceInsuranceMortgageTechBusinessTravelLegalHealth/FitnessSportsFashionRenovationReviews

Difference between a Business Loan and a SME Loan
Difference between a Business Loan and a SME Loan

Every business requires capital to keep it afloat and for the day-to-day activities and requirements of the business.

There aren't too many stark differences between a business loan and an SME loan. However, a business loan is typically to start the business and to grow it from the bottom up. An SME loan, on the other hand, is to provide entrepreneurs with the finance to grow and expand their existing business.

The interest rates for both the loans differ from bank to bank and depend on the scale of the enterprise and the amount of loan that is being sanctioned.

What is a business loan?

A business loan acts as momentum to further the pursuit of your dreams. Several financial sources available from banks and other financial institutions provide business loans to interested parties. As a business owner, you might find yourself in a position where you require a loan to start a new business or expand an existing business by meeting the working capital.
Fast access to monetary funds is what owners require to keep the business running and this need can be met with the help of a business loan.

What can I use a business loan for?

A business loan can be used to give an existing business a new look, invest in new machinery and equipment, expand the existing business setup or to increase the working capital of the business to hire new personnel.

Types of business loan

  1. Loans on accounts receivable
  2. Asset finance
  3. Credit line
  4. Equity funding
  5. Short term business loans

Who is eligible for a business loan and the criteria?

For a Self Employed professional

For a Private Limited or Limited Company

For a Proprietorship firm or a limited liability partnership

The professional should possess the required skills and qualifications to avail the loan. Required qualifications differ from one bank to the other.

The net annual income of the business for loans up to Rs. 15 Lakhs should be more than Rs. 1.5 lakhs after taxes.

The company must have profit and loss statements. Different financial institutions assess the repayment ability of the borrower prior to the loan being sanctioned.

Management consultants, doctors, engineers, and CA’s are required to produce proof of qualification as well.

The business should have been functioning for 6 months prior to the date of the loan application.

The business should have been functioning for 6 months prior to the date of the loan application.

 

 

The business should not be blacklisted.

The business should not be blacklisted.

 


Documents required to apply for a business loan

Business documents

Financial documents

KYC documents

Partnership deed

Income tax returns for the past 2 years

2 copies of passport sized photos

Incorporation and establishment certificates

Profit and loss reports

Aadhar card

Company PAN card

Bank statements for the past 6 months prior to applying for the loan

PAN card

Proof of business registration

VAT returns for the past 2 years

Voter’s ID


What is an SME loan?

An SME loan is mainly for the 55 million small and medium enterprises in India. The booming community employs roughly 106 million Indians currently and this is only going to increase.

Access to finance is a major problem faced by SMEs in India and these loans are to alleviate the problem. Funding by private financial institutions and government organizations ensure that the SME status in our country is boosted by concentration on the growth of these various enterprises.

Various banks offer tailored funding processes for the SMEs according to their particular business model. The loan amount can vary from Rs 1 Lakh to Rs 1 crore depending on the scale of operations.
Repayment options also range from 12 months to 36 months with no foreclosure charges – at most major banks.

What can I use an SME loan for?

The finance from an SME loan helps to launch these small and medium enterprises and helps to acquire new products, takes care of the overhead costs, business expansion costs and the requirements of the warehouse. Marketing and advertising funding can also be obtained from the bank.

Types of SME loan

  1. Term loan
  2. Bank guarantee loan
  3. Asset-based business loan
  4. Point of sale finance product
  5. Cash credit loan
  6. Working capital loan
  7. Pradhan Mantri Mudra Yojna

Features of SME loan

  • Loans are available up to Rs 1 crore.
  • Below a certain amount, most banks do not ask for business or personal collateral against the loan amount.
  • As of today, all financial institutions offer fast, minimum-paperwork processing and loan handling.
  • Flexible tenures of the banks make the SME loans more attractive for business owners.

Eligibility criteria

  • Minimum age of the borrower should be at least 21 years.
    The borrower should not be over the age of 65 at the time of loan maturity.
  • The minimum annual income of the SME business should be at least Rs. 1.5 lakh
  • Minimum turnover of the business should be at least Rs 40 lakh. This is the criteria posed by most banks.
  • The business should show consistent profits for the two years prior to applying for the loan.
  • The interested borrowers should have been in the same line of business for 3 years at a stretch at the time of loan application.

Documents required to apply for an SME loan

Business documents

Financial documents

KYC documents

Audited Financials

Income tax returns for the past 2 years

2 copies of passport sized photos

Incorporation and shops and establishment certificates

Profit and loss reports

Aadhar card

Company PAN card

Bank statements for the past 6 months prior to applying for the loan

PAN card

Proof of business registration

VAT returns for the past 2 years

Voter’s ID


Loan application for business and SME loan

The loan application for a business as well as an SME loan can be found online. Upon filling up the application form and submitting the necessary documents, the loan will be further processed. Typically, the loan is sanctioned a few weeks after the applicant has been vetted and all the necessary documents have been submitted.

+4
Author's Score
0.2
Up Votes
1
Down Votes
0
Articles
0
Voted on
1 articles
Thanks for sharing nice information on business and SME loan
https://www.invertisuniversity.ac.in/about-us/
Fonolive.com, #1 Free Social Classifieds
Tags:
business loan online, business loan online, sme loan online, sme loan online, business loan in india, business loan in india, sme loans, sme loans, business loan, business loan,

Recent Articles

In today’s fast-paced, highly competitive business world, it gets tough for SMEs to keep up with the speed...
A Personal Loan is your friend in need, to deal with your short term financialcrisis. No matter what your...
Benefits of coding and testing your ideas.   Today’s investing is getting more and more competitive....
The number of individuals carrying more than one credit card is growing at a staggering pace in the...
Backpage EscortsEscorts Canada, TorontoEscorts VancouverEscorts CalgaryEscorts Ottawa

Copyrights © 2019 Voticle. All Rights Reserved.